Russian oil expert Ivan Priobrazhenskiy has commented on the negative outcome of curbing oil production (the OPEC+ deal). He claims that while trying to create an artificial deficit in the global oil market, the OPEC+ deal participants actually did American shale oil producers a huge favor. The thing is that American shale oil companies have been boosting their production over the last year or so, and they can take the United States to the status of the world’s biggest oil producer. They have already outpaced Saudi Arabia and are close to outpacing Russia, which is currently number one in the world in terms of crude oil production.
At the same time, America becoming the world’s leading oil producer is not something unreal anymore. By the way, this is exactly what the IEA predicts. Given the fact that the IEA is headquartered in France, we can say that the agency is equidistant from all the parties concerned. The local experts publish oil reports on a regular basis. The latest one reads that the American shale oil companies are going to boost their production in the near future.
Another production increase may trigger a price drop in the global oil market. In this case, lower oil prices will result from increasing oversupply, which is a natural outcome in such situations.
The report reads that over the period of September through November, American shale oil companies increased their production by 846K b/d. So, they expect the United States to outperform Russia and become number one later this year.
At the same time, experts predict the global economy to accelerate its growth this and next year, which will definitely increase the global demand for crude oil. The IMF also expects the growth rate to be higher than expected. Based on the IMF’s report, the IEA increased their global demand growth forecast from 1,3 million b/d up to 1,4 million b/d. However, it’s interesting to note that last year, this rate happened to be slightly higher – 1,6 million b/d.
The OPEC+ deal stimulated higher shale oil production in the United States
In theory, this set of rules is supposed to trigger an oil rally, which is something that was planned by Russia and the OPEC when they were signing and then extending the so-called OPEC+ agreement designed to cap their oil production.
Indeed, the IEA reports that the participants’ oil inventories did actually drop dramatically – from 264 million barrels in December 2016 all the way down to 52 million barrels in December 2017. On the other hand, lower inventories and higher prices triggered another shale oil boom in the USA. Apparently, American shale oil got profitable again. The thing is, that shale oil production is relatively costly, which makes it unprofitable at low oil prices.
The bottom line is that Russia and the OPEC actually helped the American shale oil industry to rise again, thereby creating a serious rival. The shale oil production in the United States has been booming over the recent months. Experts report that the local shale oil companies altogether have already outperformed Saudi Arabia in terms of daily oil production and are now on their way to outpace Russia and become the world’s biggest oil producer.
NordFX experts report that Brent oil is currently trading at 65,6 dollars per barrel.
